MINDING YOUR BUSINESS.

Survival takes altered course

Variable economic conditions challenge small-business owners

It's every small company's nightmare: A giant like Microsoft Corp. enters your market by acquiring your chief competitor, dramatically changing the playing field.

Add to it the exit of your business partner, and you can't blame your employees for wondering if it is all over.

Ten months ago, that was the scenario facing Manish Patel, president and chief executive of Where2GetIt, a Wheeling-based provider of online and telephone-based locator services. Microsoft acquired competitor Vicinity at about the same time that Patel bought out his business partner.

But today, Patel said, morale among the company's 15 workers is "better than it's ever been" because he has made it clear he's committed to the company for the long haul. And despite the competition, the company's sales continue to grow.

"We had to learn how to morph ourselves in order to meet the needs of the marketplace, but also to step away from that 800-pound gorilla [Microsoft] because we didn't want to be squashed," he said.

As consolidation and a sluggish economy take a toll on many small and midsize technology companies, business owners are changing course to keep their companies afloat.

Although some make changes on the fly, experts suggest that the more thought that goes into a shift in strategy, the more likely it is to succeed. Adopting a new plan requires flexibility, creativity and the ability to convince workers to go along with the change.

"People will follow into unknown times a strong leader," said Scott Nelson, a vice president at Linkage Inc., a Massachusetts-based organizational development firm.

Patel acknowledges that "any kind of change is difficult," but he said he has successfully moved his company beyond the transition phase by communicating his long-term commitment to making it work.

In general, experts say, managing change effectively requires having a clear strategy for the future and the leadership to carry it out.

"Leadership plays a critical role in those organizations that have successfully navigated change," Nelson said. "It's one of the single biggest factors in helping organizations work their way through challenging and turbulent times."

The first step is knowing where you want to go, Nelson said. Sometimes that means adopting a new vision when outside forces conspire to make the old one obsolete.

Alan Warms, CEO of Participate Systems, once dreamed of taking his Chicago-based technology company public and growing it from 120 employees to more than 1,000 employees. But those dreams were dashed when the dot-com bubble burst.

To survive, Warms scaled back, changed the direction of Participate Systems and modified its name, formerly Participate.com. Although the company started out helping clients set up online business communities on a fee basis, the company's 50 current employees sell and rent customized software to the same customer base. The common thread, Warms said, is a focus on the customer.

"We've always been about solving problems for our customers," he said.

For Participate Systems, the change from services to product development and sales was significant.

"We had to start from scratch," Warms said, including redefining the company right down to "who we are, what do we sell and how do we position it."

The transition meant some workers were let go, while Warms hired others in product development. Even for the survivors, the transition was difficult, Warms said. Indeed, to make a transition successful, business leaders have to build support for the plan, Nelson said. That requires employee involvement and engagement.

Getting people to accept the new reality is easier if you're brutally honest, Warms said.

In fact, don't promise anything you can't deliver, said Patrick Mosher, an associate partner in Accenture's human performance practice in Minneapolis. Ask yourself what is the strongest statement you can make that is true today and will be true six months from now, he said.

Communicate more, not less

At the same time, don't hold back on communicating what's going on, because a lack of information leads people to fear the worst, said Mary Lynn Pulley, senior program associate at the Center for Creative Leadership in Greensboro, N.C.

"Studies of organizations that weather extreme transitions show that it is important for leaders to communicate to a degree that some might think of as overcommunicating," Pulley said.

For Warms, that meant many one-on-one conversations. Besides explaining the company's new strategy, Warms tried to reassure workers by putting the transition into perspective.

"In a 30-year career, you're lucky if 15 aren't in a recession," he said, noting that in spite of the economic climate, the key to success remains serving customers.

Like Warms, Patel found a clear path for his company by paying close attention to customers' needs. Instead of radically changing the company's strategy, Patel refocused it on the areas where the company excelled.